Diarmuid Wilson confirmed that he is in legal dispute with AIB over an outstanding loan which he obtained with two business partners to invest in a pub in Cavan during the boom.

The bank issued legal proceedings in the High Court last month against Mr Wilson and his co-investors, TP Smith, a former Fianna Fail councillor, and Ann McGarry, who is married to Brendan Smith, a Fianna Fail TD.

The case was adjourned last month to allow both sides to reach an agreement and the investors are believed to be working hard to resolve the dispute. Mr Wilson said he hoped an agreement would be reached with the bank in advance of the next court hearing in February.

He said he is constrained from commenting on the case while it is before the court but acknowledged his business difficulties and said he took full responsibility.

"I am in dispute with AIB which I am hopeful of being resolved," he said. "I borrowed the money. I am trying to pay it back."

The case against Mr Wilson reflects the growth in legal actions instigated by banks calling in loans to small commercial borrowers.

As a politician, he said he is "dealing with people on a daily basis who are finding it difficult to survive".

"I can understand what they are going through," he said this weekend.

It is understood that Mr Wilson and his two co-investors borrowed about €2m to buy and restore a derelict pub in Cavan town in 2003. Mr Wilson and Mr Smith then set up another company which operated the pub. Ms McGarry's investment related to a small stake in the building.

The Smith and Wilson Tavern opened on Cavan's Main Street in 2005 and flourished but ran into difficulties as the economic crisis took hold. The business was leased to another operator before it finally shut down last year.

The pub has not traded since and AIB moved against its owners in December.

In a week when Taoiseach Enda Kenny accused people of "going mad" during the boom, Mr Wilson said the commercial investment "made sense" at the time but the business turned when the economy went sour.

Mr Wilson is not the only politician to run into financial trouble since the recession took hold. His debt is dwarfed by that of TD Mick Wallace, who is being sued for almost €19m by ACC.

Mr Wallace has admitted to fears that ACC could go down the route of bankruptcy which would force him out of office, under the Electoral Act.

It is understood that despite his debt, Mr Wilson's tax affairs are in order, as required under the Standards in Public Offices Act.